Sonu Varghese
The AI Buildout Needs a Lot of Money—¬Enter Debt (and Financial Engineering)
I’ve written a lot about how tech capex spending by the hyperscalers is set to run around 2.5-3% of GDP in 2026 and 2027. What’s striking is how fast the estimate keeps moving higher. Coming into this year, 2026 capex was projected at $515 billion. After Q2 earnings it’s $775 billion, and 2027 is above …
Sonu Varghese
August 19, 2026
Fiscal Deficits Are Exploding, and That’s a Problem
I’m not one to usually worry about government debt but I believe we have a problem, folks. Inflation’s elevated and AI needs a ton of capital to finance its buildout, both of which would normally raise the cost of capital, i.e. interest rates. But on top of that, we’re running unprecedented fiscal deficits. Via the …
Sonu Varghese
August 18, 2026
The State of the American Consumer in 11 Charts (They’re Fine)
Every time we get a soft consumption print, concern rises that the consumer is tapped out. This time it’s retail sales, which fell 0.6% in July, while core retail sales (excluding autos and gasoline stations) fell 0.4%. But Amazon Prime Day shifted to June, pulling sales forward. Zooming out, retail sales have run at a …
Sonu Varghese
August 14, 2026
Inflation’s Still A Problem, And Consumers Are Feeling The Heat
We’ve got a bit of a breather on the inflation front, with two consecutive benign readings. Headline CPI rose at an annualized pace of just 0.9% in July, after falling 5% in June, taking the 3-month annual pace to just 0.5%. Headline CPI is still up 3.4% from last year, reflecting an energy shock that …
Sonu Varghese
August 13, 2026
Payrolls Are Looking Shaky Once Again, But the Labor Market Is Fine
Last month I wrote that the payroll data threw us a bit of a curveball, and here we are again. The economy shed 23,000 jobs in July, well below expectations for an 80,000 gain. The headline number looks ugly, but payroll data comes with a lot of noise, and the noise has been especially loud …
Sonu Varghese
August 7, 2026
The Fed’s Going to Let It Run Hot (Until They Don’t)
Federal Reserve (Fed) Governor Chris Waller recently said that sternly staring at inflation until it melts before our withering gaze is not an option. Yet that appears to be exactly what the Fed plans to do. The Fed kept rates unchanged at its July meeting in a 9-3 vote, with three dissents showing the committee …
Sonu Varghese
July 30, 2026
If The Fed Can’t Print Oil or Chips, Why Are We Talking About Rate Hikes
The Federal Reserve’s next meeting is this week (July 27-29th), and the level of uncertainty around what they may do is the highest we’ve seen in recent years, especially this close to a meeting. The probability of a rate increase is 37% (as priced by the futures market), which is as good as a coin …
Sonu Varghese
July 28, 2026
The World Cup Is Over—and I’m Not Quite Ready to Move On
5 weeks, 48 teams, 104 games, a record-breaking 308 goals, 1 winner. Congratulations, Spain! The final was anti-climactic and, dare I say, boring, but the team that deserved to win did so. Still, it was an amazing five weeks of entertainment, and now it feels like a hangover. I yearn for more, so I’m trying …
Sonu Varghese
July 22, 2026
Three Things I’m Watching This Earnings Season
We just released our Midyear 2026 Outlook: Still Riding the Wave, raising our estimate for the S&P 500’s full-year return from 12-15% to 15-18%. This is on the back of an AI wave that continues to roll, though the water is choppier than it looked at the start of the year. While the labor market …
Sonu Varghese
July 20, 2026
The AI Wave Is Everywhere, Even in Small Caps
You would think AI is a growth story, but it’s showing up in more places than in the obvious “large cap growth” stocks. In a recent blog I noted how even so called “value” stocks have seen returns driven by the AI wave. Looking at style box returns for the first half of the year, …
Sonu Varghese
July 8, 2026